What to do when payday lands on a holiday

Q         If a pay date lands on a holiday, when do we need to pay our employees—before the holiday or on the next business day after it?

A   Although it doesn’t happen often, there are certain times during a calendar year when payday could fall on a bank holiday—New Year’s Day, Independence Day, and any other number of federal holidays when banks are closed. When this happens, it prevents you as an employer from having payments processed or funds transferred, even if the day is supposed to be payday. The Federal Reserve has published a list of bank holidays for a number of future years to help you plan for these occurrences.

Although the Fair Labor Standards Act (FLSA) addresses payments for minimum wage and overtime, it’s silent about payroll obligations for employers when payday falls on a bank holiday. It does, however, mandate that employers pay their employees on a consistent basis. Accordingly, best practice would dictate that you pay your employees on the day before payday, and this is what the federal government does with its employees. The U.S. General Services Administration publishes nine years of payroll calendars, and when bank holidays fall on regularly scheduled paydays, federal government employees are paid on the business day preceding the holiday. Similarly, the Social Security Administration distributes benefits checks on business days that precede the holiday if the payment day is scheduled to be on a holiday.